The NewsHour with Jim Lehrer

JIM LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight, a hurricane Floyd update from the national hurricane center in Miami; how East Timor looks to the foreign minister of Australia, which will be leading an international peace force there; an extensive report from Moscow on Russia's money laundering crisis; and some official word on the new growing concern over disease-bearing mosquitoes in New York. It all follows our summary of the news this Wednesday.

NEWS SUMMARY

JIM LEHRER: Hurricane Floyd struck the Atlantic coast today. It pawed at Florida, causing less damage there than expected, and then moved North toward Georgia and the Carolinas. Kwame Holman has our report.

KWAME HOLMAN: Daytona Beach, Florida was among the coastal areas that absorbed pounding surf, high winds and hard rain today, peripheral effects of one of the strongest hurricanes ever in the Atlantic. As the eye of Hurricane Floyd continued to creep toward shore today, Georgia bore much of the onslaught, then the Carolinas. More than three million people from Florida to North Carolina have been ordered to flee inland since Monday, the largest peacetime evacuation in U.S. history, the federal government said. President Clinton declared a state of emergency in Georgia. Florida and the Carolinas have been declared federal disaster areas, meaning federal funds will arrive there soon. Stopping in Hawaii on his way back from New Zealand, the President praised government agencies at all levels, including the Federal Emergency Management Agency.

PRESIDENT CLINTON: Let me commend the efforts of FEMA, the National Weather Service, the National Hurricane Center and the other federal agencies, and state and local officials, who are working around the clock to protect people and property. Their efforts, along with new technologies, have enhanced our ability to predict and prepare for these storms. I hope that every citizen will heed the warnings of the officials and the recommendations to take every action to protect their families and stay out of harm's way.

KWAME HOLMAN: Governors from states as far North as Delaware have declared emergencies as well. Heavy surf advisories were issued for the waters off Cape Cod, Massachusetts. Back to the South in Virginia, fighter jets and Navy ships were moved for safety reasons. By late afternoon, Floyd was a Category 3 hurricane, packing winds of 115 miles per hour. That's down from its peak of 155 yesterday, when it battered the Bahamas. One person was reported killed as roads there were flooded and ships were pushed onto shore.

JIM LEHRER: And we'll have more on the hurricane right after the News Summary. The U.N. Security Council voted early today to send a multinational force to restore order in East Timor. Australia will lead the force of at least 7,000 soldiers from Asian and European nations. The resolution authorized the troops to use all necessary measures to stop the violence by Indonesian militias. In Washington, State Department Spokesman James Rubin explained the U.S. role in the operation.

JAMES RUBIN, State Department Spokesman: We do think it's important for us to participate, that having a role in the logistics, in the communications and in the intelligence area is an appropriate role for the United States because these are capabilities that we have unique expertise in. We are talking about hundreds of American servicemen and women, not thousands.

JIM LEHRER: We'll have more on East Timor later on the program tonight. Barclays Bank of Britain is closing down dozens of corporate accounts in Russia. A company spokeswoman confirmed the stories in British newspapers today. The bank blamed economic turmoil in Russia for the move. We'll have more on the Russia money story later in the program tonight. Consumer prices were up last month, the Labor Department reported today. Its Consumer Price Index rose 3 percent in August, the same as the previous month. The biggest increases were in gasoline and other energy prices. But some things, like clothing, were cheaper. The Index is considered the main measurement of inflation. The House approved campaign finance reform last night. The vote was 252-177. It would ban so-called "soft money" donations to parties, which are then turned over to individual candidates. It would also restrict issue ads, commercials that discuss a candidate's record but do not urge a vote for or against that politician. Here is a sampling of the debate.

REP. JOHN TIERNEY, (D) Massachusetts: The clean money, clean elections bill would limit the amounts of money spent. It would make campaign season shorter by virtue of the distribution schedule. It would make the money chase end. People would not have to spend virtually all their time raising money and in fact would allow people that aren't personally wealthy and don't know people with $50,000 or $75,000 or $3,000 able to run for office and have a reasonable prospect of campaigning and winning.

REP. JOHN DOOLITTLE, (R) California: The more we pile on regulation, the more we discourage people from participating. The more we reward the wealthy and those who have notoriety, what's the matter with a person of average means being able to run for office and going and getting some other people who have greater means to back him or back her and get those views out? Money does not buy the elections but money is the means of communicating the views to the electorate. And then the electorate can decide.

JIM LEHRER: The House passed similar campaign reform legislation last year, but it died in the Senate. And the Senate will take up this bill next month. And that's it for the News Summary tonight. Now it's on to a hurricane update; an Australian view of the East Timor situation; money laundering in Russia; and some very bad mosquitoes.

UPDATE - FEARSOME FLOYD

JIM LEHRER: The hurricane update comes once again tonight from the National Hurricane Center in Miami. A short time ago I spoke with Max Mayfield, deputy director of the center.

JIM LEHRER: Mr. Mayfield, welcome.

MAX MAYFIELD: Thank you, Jim.

JIM LEHRER: As we speak, where is Floyd at the moment?

MAX MAYFIELD: Well, right now the center of Floyd is about 215 miles to the to south/southwest of Wilmington, North Carolina, headed towards the north at about 17 miles per hour. We think that the eye will actually be on the coast sometime shortly after midnight in the vicinity of Wilmington. If it actually moves to the left of that track a little bit earlier, if it's to the right, a little bit later. But we don't want to just focus on that eye. This is a large hurricane, and in fact, the hurricane force winds extend out about 140 miles to the northeast of the center. The worst conditions will be nearer and to the East of where the eye crosses the coast. So it looks like right now, it's primarily the North Carolina coast that's going to take the brunt of this hurricane.

JIM LEHRER: Mid-Atlantic defined as what in terms of states?

MAX MAYFIELD: Well, it looks like the landfall will likely be here near the South Carolina/North Carolina border, and then it will start turning more towards the Northeast. And I think by this time tomorrow evening it will be moving over the lower Chesapeake, and then start accelerating outward and to the East, off the New England coast, and then in another day it will be racing up over Newfoundland somewhere.

JIM LEHRER: And how strong will the winds be?

MAX MAYFIELD: Well, it looks like the good news here is that it has weakened a little bit. It's down to 115 miles per hour. That's still a Category 3 hurricane on the Saffir-Simpson Hurricane Scale, still capable of producing considerable damage. By the time it moves inland, it will start to weaken, obviously, and I think by this time tomorrow, it will be either a strong tropical storm or a weak hurricane. But it's still strong enough and moving fast enough that these strong hurricane-force winds will spread over much of the eastern portions of North Carolina.

JIM LEHRER: Okay. And there's also a surge that goes with this, is there not? I mean there's flooding in addition just to wind possibilities?

MAX MAYFIELD: Exactly, Jim. In fact, if you go back historically, you'll find that nine out of ten people have been killed by the storm surge in a hurricane, and we have been talking to emergency management people all up and down the coastline here, and it sounds like they really have gotten the people to respond very well and gotten away from the coastline. We also want to emphasize these winds that we talked about spreading inland and the rainfall. If you go back over the last 30 years, we've looked at the deaths in the United States from land-falling hurricanes, and we've actually had a considerable loss of life from inland flooding, as well. So hopefully we can have some lessons learned here and not do anything foolish. We also have loss of life from people driving their cars through flooded out roadways, and also young children playing in flooded streams and rivers, being swept away. So if we use some common sense here, we don't have to have that loss of life.

JIM LEHRER: Now, when you use the term "surge," what do you... define that for us.

MAX MAYFIELD: Okay. It's really...it's a dome of water that comes in gradually. It's already coming in here while the hurricane is well off the coast. And then as it makes landfall, it comes in much faster and we're actually expecting seven to eleven feet of storm surge near and to the East of where that eye crosses the coast. That's not nearly as much as Hurricane Hugo. They had about a 20-foot storm surge in Hurricane Hugo, but this is certainly enough to cause considerable damage there on the North Carolina Coast. And then as it moves up towards the Northeast, we expect lower valleys, probably two to four feet, say in the lower Chesapeake and also Delmarva in that region.

JIM LEHRER: What kind of rainfall should we expect?

MAX MAYFIELD: Well, that's a real problem because they've had so much rain already in North Carolina and Southeastern Virginia. The ground is very saturated already. We're forecasting six to twelve inches of additional rainfall, so I think that's going to help, you know, knock some trees down as those strong winds spread inland as well.

JIM LEHRER: Continue the kind of tentative schedule here, or the expectation. Southeast Virginia tomorrow, correct?

MAX MAYFIELD: Right. And moving up...you know, it's a large circulation still, so it will be moving over the lower Chesapeake and the Delmarva Peninsula tomorrow evening. Then the following evening it should be somewhere off the New England coast. Our track actually has it passing near the Cape Cod area. This will be more like a wintertime storm, I think, up in the Northeast. It'll be accelerating out fairly rapidly, but it will be a significant wind, rain event and some coastal flooding.

JIM LEHRER: And the major hit comes tomorrow. What kind of things should...what kind of damage should be anticipated? What could this thing do?

MAX MAYFIELD: Yeah, I really think the main damage is going to occur tonight, and it's going to be on that North Carolina coast and the upper South Carolina coast from the storm surge, from the strong winds and also the rainfall. Now, the rainfall is going to spread well inland, so the threat from the rainfall will be over a much, much larger area. And we really want people to know that a hurricane is not just a coastal event. We also have that loss of life well inland from the flooding, and we really don't want to see that happen.

JIM LEHRER: All right. Mr. Mayfield, thank you very much.

MAX MAYFIELD: Thank you, Jim.

FOCUS - PEACKEEPING

JIM LEHRER: The Australian view of the East Timor crisis: We start with a report from Australia, whose soldiers will lead the international force. Lindsay Hilsum of Independent Television News reports.

LINDSEY HILSUM: The British destroyer "HMS Glasgow" came into Darwin Harbor this morning. Now the U.N. Security Council resolution has been passed, the next port of call should be Dili, maybe as soon as this weekend. Darwin Harbor is filling up with ships from the multinational force. They'll be under Australian commands, but a dozen countries, mainly Indonesia's Asian neighbors, are expected to take part. They're stocked up, ready to go. The eight royal marines and 270 crew on board "HMS Glasgow" may play a humanitarian role in East Timor.

COMMANDER JOHN KING, HHS GLASGOW: I have plumbers, I have electricians, I have people who consider their hands to being brickies. I have lot of medically trained personnel who could be used ashore. My people are willing to do it, and wanting to do it if it comes to that.

LINDSEY HILSUM: But they're servicing the hardware. This mission could be dangerous. The U.N. resolution allows the multinational force to restore law and order in East Timor. The men and women onboard this ship are on exercise in the South China Sea when they were told to prepare themselves to go to East Timor. But they still don't know what they'll find when they get there. The Indonesian military and militia will still be on the island, and whatever the Indonesian government says, they may be very hostile to the in-coming peacekeeping force. More than half the 8,000-strong force will be Australian. These troops near Darwin have been training for months, but the original plan was to go in as a transition force if the East Timorese voted for independence, not to mop up militia. One militia leader is reported to have said today that his men would eat the hearts of all Australians and anyone in the U.N. force.

SPOKESMAN: I think everyone's frightened at one point in their life, and you'd be a fool to say you're not scared. But it all comes down to training and how you respond to your training and how you react to different scenarios. I sit down and watch the news every night, and try to keep abreast with what's going on with the situation over there at the moment. I've tried to instill within my soldiers that they should also just to keep them abreast.

LINDSEY HILSUM: The destruction of Macaw, East Timor's second town; few people remain, surviving somehow. When the troops arrive, they won't find many East Timorese to protect until those who have fled return.

JIM LEHRER: Earlier today, Margaret Warner interviewed the foreign minister of Australia, Alexander Downer, from the United Nations. There were some technical problems with the U.N. camera. But here's the interview.

MARGARET WARNER: Hello, Mr. Foreign Minister. Thanks for being with us.

ALEXANDER DOWNER: It's a pleasure.

MARGARET WARNER: How quickly are you going to be on the ground, and with how many troops?

ALEXANDER DOWNER: Well, we can start getting people onto the ground at the weekend, and, obviously, the force will build up over time. But our objective is to make a start this weekend, and we're looking at a force of around 7,000, that kind of size.

MARGARET WARNER: And what's going to be the make up of the force?

ALEXANDER DOWNER: Well, it's being led by Australia, but it's going to be supported significantly by the United States and countries like Britain and Canada. But also there'll be a considerable Asian component in it. Some of the ASEAN countries will contribute, countries like Korea. There's quite a long list of countries, which over time will progressively contribute. And we look forward to it having a genuinely multinational character.

MARGARET WARNER: The Indonesian government was resisting the idea of Australia leading the force, and yesterday you said you understood their sensitivities about Australia. Explain those sensitivities, as you understand them, particularly for an American audience.

ALEXANDER DOWNER: Well, they have some sensitivities about Australia because, remember, we are right next door to Indonesia. But we have what Americans would understand as a Western culture and with the activities that have been taking place in East Timor, you can imagine living next door, the public reaction to that. The publicity here in the United States has been quite substantial but in Australia it's been sort of five times as a great. A large number of Australian journalists were in East Timor. There was very graphic footage on our television screens night after night, in our newspapers and radio, absolutely full of it. And so there was an enormous public reaction in Australia. And it led to protests outside the Indonesian embassy and Indonesian consulates, and flags were burned and all the sort of things you see in these kind of environments. And bearing that in mind, and the close relationship that there's been between Australia and Indonesia over the last, you know, particularly last quarter of a century, people in Jakarta reacted fairly negatively to these demonstrations in Australia.

MARGARET WARNER: All right. Now, what are going to be the rules of engagement for this force?

ALEXANDER DOWNER: Well, the details of the rules of engagement are being worked out, and so that is a matter that the military are working on at this moment. But I can sort of broadly say that this resolution from the Security Council is very strong. It's a so-called Chapter 7 mandate, which does give the multinational force a capacity to enforce the mandate that it's been given; that is, to restore peace and security in East Timor. It'll have the capacity to do that in a very strong way. And that's what we want. I mean, we don't want a situation, as was the case some years ago, for example, in Bosnia, where you have some U.N. force going in to a relatively dangerous environment but with no capacity to enforce its mandate. It makes a laughing stock of the United Nations, and in an environment like that, it's very bad for the morale of the military. So, here we have a situation where there is a very strong mandate, they're able to take tough action to enforce or to help enforce peace and security and to protect UNIMET and even to, where possible, provide, help provide, humanitarian assistance to people in East Timor. So we're satisfied with broadly the mandate that's been given to the multinational force by the Security Council.

MARGARET WARNER: Now an adviser to President Habibie of Indonesia, Mr. Anwar, warned today - it's on the wires today - that Australian troops in particular he thinks could be singled out by the anti-independence militias, targeted essentially. There was also a statement from one of these militia groups saying that they were going to eat the heart out of anyone who came to East Timor. How dangerous do you think this mission is?

ALEXANDER DOWNER: We have no illusions about it being dangerous. It's certainly that, and, after all, we wouldn't need armed, an armed multinational force if the situation wasn't dangerous. But there again - and, you know, just to add this, bearing in mind the performance of the militias over recent months - you can see that these people are not kindly people. But, nevertheless, this will be a very well armed and a very well protected multinational force and I think you'll find it will be very effective. And we're very confident and positive about it being able to fulfill its task. Inevitably, from some of the sort of hot-headed leaders of the militias you'll get inflammatory comments like the one you quoted, but not for one minute will a multinational force of this kind be intimidated by that sort of language.

MARGARET WARNER: Now, there are some estimated 25,000 still Indonesian military there. What's going to be their role?

ALEXANDER DOWNER: Well, that figure includes military and armed police. Well, obviously over a period of time there will be a downsizing and eventually the withdrawal of the Indonesian military and police. This is a process that's really going to work in two phases. There's the next two months where there will be a continuation of an Indonesian military and police presence. And then after the Indonesian parliament makes its decision to separate East Timor from the rest of Indonesia, then the Indonesian military and police will downsize very considerably and ultimately withdraw. So in the short-term there will obviously be a requirement for the multinational force and the Indonesian military to work quite closely together. And we're putting in place now mechanisms to make that a cooperative arrangement. And we've had already military- to-military talks with the Indonesians here in New York. And those talks are continuing later today. And so far the talks have been very productive.

MARGARET WARNER: But given the Indonesian military's I think now documented role in supporting and certainly not curbing the violence by the militias, how can they play a constructive role now in the peacekeeping?

ALEXANDER DOWNER: Well, I don't know that their role is going to be, if you like, as active as one might hope. That's certainly been the problem up until now, and that's why President Habibie has called in a multinational force to reinforce what has been, frankly, a failure to maintain security in East Timor. So some of the onus here will now of course fall on the multinational force with its very precise and strong charter but the practical point here is there does need to be a cooperative arrangement with the Indonesian military in the short-term. In the medium-term the Indonesian military will withdraw and then a peacekeeping force will replace this multinational force, and I think at that point you'll see the militias sort of fade into the bush.

MARGARET WARNER: But for now in this two-month period is there any question that if there's a difference in command between the multinational force's commander on the ground and the Indonesian military, that the international force has top say, first say, if that order prevails?

ALEXANDER DOWNER: Well, of course, themultinational force is driven by the resolution passed by the Security Council early this morning. The Indonesian military have their own command structure. The important thing is that there is a linkage between the two. And it's a frequent and appropriate linkage. And those mechanisms are now being put in place through the military-to-military discussions between the Australians and the Indonesians. So I'm pretty optimistic that that will work quite well. Look, I think at the end of the day, the environment on the ground is going to be completely different with the insertion of this multinational force. There have been units in the Indonesian military, which have obviously been very close to the militias; the Indonesians say that they're rotating some of those units now out of East Timor. I hope that's right. But it is important at this stage for me publicly to say that we want there to be effective cooperation between the TNI, that's the Indonesian military, and a multinational force.

MARGARET WARNER: Okay. And what does happen to the militias? You said you thought they'd fade away but, I mean, many of these are men who certainly have been accused of violence, of killing, burning, looting. What happens to them?

ALEXANDER DOWNER: Well, I mean, look, the first task is to restore peace and security in East Timor. And ultimately there will be an effort made by the United Nations to ensure that the militias, as well as Falintil, who are the pro-independence guerrillas that they are disarmed. And that will have to be done over time. That's not going to happen immediately but over time our expectation is that that will happen. But there have been a number of efforts made by the Indonesians to achieve disarmament, and the cantonment of the weapons of both the militias and the Falintil, which have been unsuccessful.

MARGARET WARNER: I guess what I'm asking, Mr. Minister, is part of your mission to investigate any members of the militia who have engaged in violence, or is that outside your purview?

ALEXANDER DOWNER: Well, it's not the main charter of the mission, and obviously it's very difficult to sort of set up a kind of forensic policing role of that kind for a military mission. Their mission is very clearly spelled out in a Security Council resolution, although the Security Council, of course, has been deeply concerned by the violence that's taken place up until now. And we would like those who are responsible for the violence and for human rights abuses to be brought to justice, but if you look at the precise charter of this multinational force, then the focus is on the restoration of peace and security. It's on the protection obviously of UNIMET -- the United Nations mission in East Timor -- and it's to assist insofar as it is able with humanitarian assistance.

MARGARET WARNER: And finally, Mr. Minister, I know you have to go, but there has been a lot of editorial comment in your newspapers and a lot of E-mail from our viewers from Australia of disappointment with the U.S. level of involvement, commitment, support, for your efforts. Were you disappointed in the initial U.S. response?

ALEXANDER DOWNER: Well, I think that in the early days there was a need for greater clarity in what the United States was proposing to do. But I can say that from discussions with our own military people - and this is the important point - they're very satisfied now with the level of support from the United States.

MARGARET WARNER: All right. Well, thank you very much. And thanks for being with us.

ALEXANDER DOWNER: It's a pleasure.

JIM LEHRER: Still to come on the NewsHour tonight, laundering money in Russia and disease-bearing mosquitoes.

FOCUS - CORRUPTION SCANDALS

JIM LEHRER: The Russian story is reported by special correspondent Simon Marks, on assignment for the NewsHour.

SIMON MARKS: They are three separate corruption scandals that have rocked the Kremlin to its foundations, threaten to engulf President Boris Yeltsin and derail U.S.-Russian relations. All three are complex, detailed, and dominated by allegations that are not yet proven facts; with their dizzying array of influential characters, they have created a firestorm. Each scandal centers on money, and each scandal involves alleged dubious business dealings with a wide range of countries worldwide. Scandal number one involves the Bank of New York. It hit the headlines a month ago -- at its heart, questions about up to $15 billion that reportedly passed through as many as nine accounts with the bank. The accounts were overseen by two Russians, both vice presidents with the bank, one in New York, the other in London. The London employee, Lucy Edwards, who was born Ludmila Pritska, has been fired by the bank and remains behind the closed doors of her apartment in Britain.

SIMON MARKS: We're wondering whether you'd be happy to talk to us about your suspension from the Bank of New York.

LUCY EDWARDS: I have no comment at this time.

SIMON MARKS: Is there any chance we could film you on the doorstep?

LUCY EDWARDS: You can talk to my lawyer.

SIMON MARKS: The Bank of New York, which has been cooperating with federal investigators, reportedly opened up to nine accounts related to a company called BENEX. BENEX, based in Britain, has only one director and shareholder, a Russian named Peter Berlin. Berlin is married to Lucy Edwards, the bank's fired London employee. And at the bank, she helped oversee her husband's accounts. Investigators say the company is also allegedly tied to notorious Ukrainian mobster, Semian Mogilevich. Mogilevich denies any connection to prostitution rings, drug sales, and other criminal businesses. But underworld activities he allegedly controls throughout the former Soviet Bloc are believed by investigators to be responsible for at least some of the money passing through the BENEX accounts.

JIM MOODY, Former FBI Deputy Assistant Director: The FBI, I personally, identified Mogilevich as the head of a Eurasian organized crime group operating in the United States as far back as May of 1996.

SIMON MARKS: Jim Moody, recently retired, is the deputy assistant director of the FBI's organized crime program. He was the first U.S. official to identify Mogilevich as a leading member of the East European Mafia.

JIM MOODY: He and his people conduct the traditional type of organized crime activities of extortions and drug trafficking, but he's also into arms trafficking, frauds and a lot of the extortions they do I hear are very brutal. You're talking about a smart, vicious organized crime group, and he's supposedly a smart and vicious individual.

SIMON MARKS: And certainly Lucy Edwards, the fired bank employee, knows how criminals often launder their money through banks overseas. In June, she addressed this conference in Latvia. Her subject: Money laundering. The NewsHour declined to pay the conference organizers the $10,000 asking price for an audio tape of her speech. But even if Mogilevich did have the assistance of bank employees, investigators believe the money he allegedly laundered was only a small portion of the money passing through the Bank of New York. $15 billion is more than40 percent of the Russian government's entire annual budget, so investigators have been focusing on the other players in scandal number one: Natasha Kagalovsky, a bank vice president, who supervised the BENEX accounts, and her husband Konstantin. He is no stranger to the United States. He was once Russia's envoy to the International Monetary Fund, an economic reformer who now says U.S. investigators are using him as a scapegoat in the burgeoning Bank of New York inquiry.

KONSTANTIN KAGALOVSY, Former Russian Envoy to IMF: (speaking through interpreter) My wife is being accused of being married to a Russian businessman, and that's what all these speculations are based on.

SIMON MARKS: Not so, say those investigating the bank of New York. They are based instead on concerns that some of the money allegedly laundered through the BENEX accounts could have emanated from here, the headquarters of the IMF in Washington, where Mr. Kagalovsky used to work. An internal IMF investigation is underway to determine whether IMF aid to Russia was diverted. The Russians insist it wasn't. Even if the money didn't come directly from the IMF, there are other possible sources: The Russian banks that spectacularly collapsed during the past year. They include a bank called Menatep, which once operated from this cavernous building in Moscow. Menatep's failure was not an ordinary business bankruptcy. It closed after allegedly funneling much of its reserves overseas. Investigators believe it was taking the personal fortunes of Russia's powerful business leaders to havens safe from a free-falling ruble. Among Menatep's executives at the time - Konstantin Kagalovsy, who became the bank's first deputy chairman after leaving the IMF.

FRITZ ERMARTH, Former CIA Officer: The native Russian players in the Bank of New York story, Ms. Kagalovsky and Ms. Edwards, look like they've been asked to take the fall, when we all know they were not freelancing.

SIMON MARKS: Fritz Ermath was a senior officer with the CIA, Until his requirement last year. Earlier this year in the an argument in the magazine National Interest, he accused U.S. policymakers of consistently ignoring the threat to Russia posed by top level corruption.

FRITZ ERMARTH: Some portion of the $300 billion to $5 billion of wealth that have been sucked out of Russia in the last ten years has come through various pipes, Cyprus, Switzerland, Bahamas, into New York, Bank of New York among other places. And how much actual money laundering; that is, disguising through various transactions, has been going on, rather than simply moving and depositing, I have no way of knowing. But this should emphasize the point that it's not just laundering but capital flight where the origin of the capital is not really honest and fair.

SIMON MARKS: Not really honest and fair, but not necessarily illegal either. The billions of dollars exiting Russia would, under American law, only be leaving illegally if they could be tied to specific illegal acts. And analysts say the rule of law in Russia is so lax that it may never be possible to tie specific dollars to specific crimes.

JIM MOODY: Proving that this money was generated dirty is going to be very, very difficult.

SIMON MARKS: So at the end of the day, this could be smoke without fire this could be activity that's obviously highly suspicious, highly dubious, but might be completely legal?

JIM MOODY: Based upon Russian law, that's correct. Now, the reason why is because Russian criminal law is woefully inadequate.

SIMON MARKS: The Bank of New York investigation will likely take many months, and without the full cooperation of the Russians few U.S. observers believe it will ever be possible to untangle completely the trail of money, I.M.F. Or otherwise, that that passed through the BENEX accounts. Without a complete investigation it may never be known who in Moscow authorized the flight of capital. At the moment, no Kremlin officials are implicated in the Bank of New York scandal. The same cannot be said about scandal number two. Call it the credit card scandal. Boris Yeltsin is proud of the renovations to the Kremlin that have been carried out during his rule. He's shown them to a stream of visiting foreign leaders in the course of the past few months. But those renovations may have come at an incalculable price. The second scandal dominating Russia centers on claims that, in exchange for the renovation contract, a Swiss construction company gave a $1 million bribe to the president, members of his family and his senior advisors. Swiss prosecutors say they have evidence showing that the company, MABATEX, deposited money into an account controlled by the Kremlin's chief property manager, Pavel Borodin. It's claimed that credit cards issued to Boris Yeltsin, his daughter, Tatiana Jachencko, and Mr. Borodin were paid off using that money. Last week, in an interview with the NewsHour in his Kremlin office, Mr. Borodin, who has compared the inquiries to the Spanish Inquisition, went to great lengths to proclaim his innocence.

PAVEL BORODIN, Kremlin Chief Property Manager: (speaking through interpreter) Modern banking technology allows anyone to issue credit cards in any name. Issuing credit cards is one thing. Using them is something else. These are my credit cards. Look, you can see them. This one is from Russia's Spare Bank, this one is from S.B.S. Agro Bank. These are the credit cards which I actually use. I can provide you with the receipts. With these cards, I take money from my personal accounts and I pay for business functions and meetings. Everything is transparent, everything is clear. It is not my interest to hide anything.

SIMON MARKS: And as for the allegations against President Yeltsin...

PAVEL BORODIN: (speaking through interpreter) I am sure the Yeltsin investigation will soon fall apart. I assure you that Yeltsin is on the state's payroll. He's got no idea what a credit card is all about.

SIMON MARKS: But Swiss prosecutors, according to newspaper reports in Italy, have pointed the finger firmly at Boris Yeltsin and his daughter Tatiana, seen here on the left, one of his key aides, she and her sister are suspected of using MABATEX's-backed credit cards during business trips to Europe. Uri Skuratov has his way has been blocked ever since Boris Yeltsin ordered his dismissal after the public release of a compromising videotape allegedly showing Mr. Skuratov in the company of two prostitutes. Just last week, Mr. Skuratov's home was searched again by security agents shortly after he told the NewsHour that 90 percent of the reports linking the Yeltsin family to the scandal are accurate.

YURI SKURATOV, Prosecutor General: (speaking through interpreter) As far as the Yeltsin family is concerned, I am pretty sure that Boris Yeltsin is a decent man, an honest man. And what happened was a bitter mistake made by people who are organizing presidential travel overseas and dealing with financial matters. Most likely, he didn't even know about the whole business to do with credit cards, but when we talk about his daughters, it is a more complicated matter. It would be interesting to find out howwith a modest member of the presidential administration, Tatiana Jachencko, with a salary of 5,000 to 6,000 rubles, could spend $10,000 without asking herself where this money came from.

SIMON MARKS: And Tatiana Jachencko is not the only Yeltsin family member tarnished by scandal. Valery Okulov is married to Yeltsin's other daughter, Yalena. He runs the state airline Aeroflot, subject of scandal number three. Prosecutors in Russia and Switzerland are investigating whether profits from Aeroflot was held in was stolen while Mr. Okulov was in command. He denies all the allegations, but says the welter of charges has brought anguish to his father-in-law, the president.

VALERY OKULOV, Yeltsin Son-in-Law: (speaking through interpreter) We are feeling terrible, obviously, it hurts. It's hard to get through. I have no doubt that there will be answers to these absolutely fictional allegations.

SIMON MARKS: From the Bank of New York to the Kremlin's renovations, to the Aeroflot investigation, the whiff of scandal now touches a wide range of business and political leaders in Russia, allegations and denials cloud the political atmosphere.

JIM LEHRER: At one time in that piece, we incorrectly identified a man as the Former Russian Envoy to the FBI. It should have read former envoy to the IMF, the International Monetary Fund.

FOCUS - OUTBREAK

JIM LEHRER: Next, an unusual outbreak of disease. We begin with some background from Susan Dentzer of our health unit, a partnership with the Henry J. Kaiser Family Foundation.

SUSAN DENTZER: For almost two weeks, New York City health officials have been waging an air and ground war against the mosquitoes that are spreading viral encephalitis. The disease causes a potentially fatal swelling of the brain, and has so far killed three city residents since early September. Meanwhile, eight other cases have been confirmed, and 86 suspected ones are under investigation. After the outbreak spread beyond a few neighborhoods in Queens and Brooklyn, helicopters, airplanes, and trucks expanded their spraying to all five of the city's boroughs. Mayor Rudolph Giuliani says the entire city will be sprayed over the next four weeks to prevent a more serious outbreak.

MAYOR RUDOLPH GIULIANI, New York: There could be the possibility that even once this is in remission for a short period of time, it could come back again at any time until there is frost.

SUSAN DENTZER: City officials have set up neighborhood command centers to hand out insect repellent. They've advised residents to remain inside with doors and windows closed during spraying. City officials insist the insecticides are safe, but many New Yorkers say they're more afraid of the chemicals than of the threat of encephalitis. This Central Park biker is one.

CENTRAL PARK BIKER: Central Park is one of the few places we come to exercise on weekends, and spraying the park doesn't leave New Yorkers with much other alternative to exercise and stuff. So we're very strongly against it.

SUSAN DENTZER: The type of viral encephalitis that has hit New York is called St. Louis Encephalitis, the most common variety of the disease in the U.S. It is caused by a virus thought to occur naturally in birds. Mosquitoes come into contact with the virus when they feed on the birds' blood. When they move on to human targets, the mosquitoes then transmit the virus to people. The virus enters the body's cells and spreads to the brain, where it causes swelling and interrupted blood flow. Most infected people never show any of the flu-like symptoms and recover on their own, but cases of severe infection can result in death.

SPOKESMAN: The signs and symptoms in the next five to 15 days is what you want to watch for okay.

SUSAN DENTZER: Although common in many parts of the world, serious outbreaks of encephalitis are relatively rare in the U.S. Since 1964, just under 4,500 cases of St. Louis Encephalitis have been reported to the Federal Centers for Disease Control, an average of 128 cases annually. The last major epidemic occurred in the Midwest between 1974 and 1977, when more than 2,500 cases were reported in 35 states.

JIM LEHRER: Elizabeth Farnsworth has more.

ELIZABETH FARNSWORTH: And I'm joined by Dr. Neal Cohen, the New York City health commissioner, and Roger Nasci, a research entomologist with the Federal Centers for Disease Control. Dr. Cohen, put this in context for us. How serious a public health threat is this right now in New York?

DR. NEAL COHEN: Well, although at this time the number of people who are affected by this virus seem to be relatively small, it's an important opportunity for the public health community to address the transmission of a vector-borne illness that requires a variety of ways to address it, to make sure that we're taking the necessary control measures, to provide sufficient information citywide so that citizens can reduce their potential exposure to mosquitoes and to let the public know that the dangers involved in the spraying and the insecticide that we are applying are so minimal, that they need not fear. We want don't want to reduce any chance of panic and overreaction. At the same time, we want people to think very carefully and clearly about their responsibility and the ways that they can prevent themselves from having this exposure.

ELIZABETH FARNSWORTH: How can they prevent themselves from having this exposure?

DR. NEAL COHEN: Well, naturally, since mosquito biting is occurring from dusk to dawn, we've advised the population to wear long sleeved shirts and long pants and essentially they can use insecticide, an Off product that has less than 30 percent Deet, to make sure that they don't put themselves in a position where they have unnecessary biting by mosquitoes, even though the number of mosquitoes that carry the infection we think are anywhere from 1 in 200 to 1 in 1,000 based on reports from previous outbreaks.

ELIZABETH FARNSWORTH: Dr. Cohen, who's especially vulnerable to this?

DR. NEAL COHEN: Well, the elderly and very young children because of somewhat immature or compromised immune systems are more likely to develop more severe forms of the illness. The majority of adults and young people would contract very mild cases. They may not even be aware that they have anything but a mild flu and those that do have a more severe form generally recover very well. But the elderly in large measure particularly with St. Louis Encephalitis, seem to be particularly vulnerable.

ELIZABETH FARNSWORTH: And the key symptoms are?

DR. NEAL COHEN: Well, we're seeing fever, a severe headache. An as the signs of irritation and inflammation of brain tissue progress, we can see altered states of consciousness, lethargy, confusion and in severe forms, it can be stupor and comatose.

ELIZABETH FARNSWORTH: And Dr. Cohen, how high could the numbers go? What are you expecting at this point?

DR. NEAL COHEN: Well, at this point it's very hard to throw a number out. We have 11 condition confirmed cases for sure. We're investigating 80 or so more. We're hoping that, given the spraying that we carried out, that we're on the down slope and that, as the climate changes, we're not going to see too many infections. But we need to take precautions and continue to inform the program... inform the public and take the necessary insecticide spraying and very careful application to make sure that we're really eliminating the mosquito population at this time.

ELIZABETH FARNSWORTH: Roger Nasci, do you have anything to add, and particularly on the possible numbers that could be involved?

ROGER NASCI: Well, the... as Dr. Cohen indicated, it's very difficult to speculate about what may happen. We're hoping that the control operations that we have shown have been very effective in suppressing the mosquito population, will prevent any further transmission of the virus.

ELIZABETH FARNSWORTH: You have experience with this because other cities like St. Louis, Chicago, and other places have gone through it this, right? But are they having trouble this summer?.

ROGER NASCI: Currently this is the only evidence of transmission of St. Louis virus to humans that's been reported around the country.

ELIZABETH FARNSWORTH: Why do you think it happened?

ROGER NASCI: There are some environmental conditions that make an area capable of supporting St. Louis Encephalitis virus, a mild winter, a wet spring and a hot, dry summer. And then if you add the virus into that mix, possibly carried it by an infected bird from the Southern United States, you have the right conditions for amplification of the virus in that cycle and then exposure of people to the infected mosquitoes.

ELIZABETH FARNSWORTH: Dr. Cohen shall add anything if you want, but I really want you to tell us about the detective work involved here. How did you figure out what this was since you had never had it before in New York?

DR. NEAL COHEN: Well, it certainly was a case of medical detective work and epidemiology with infectious ease disease. We received a report around august 23 from a physician at a local community hospital of two cases of elderly people who seemed to have a febrile illness and some vague neurological signs. Our epidemiologist and infectious disease surveillance team looked at those cases very carefully. And during the course of that investigation, additional cases appeared in the very same community at that facility, and their index of suspicion that there were a connecting link between these cases became very, very high. And over time, they sent the specimens to a special reference laboratories at the state and at the CDC, and considered the diagnosis of St. Louis Encephalitis, even though there was a lot of cynicism in the public health community because it had never appeared before in New York City. As soon as the diagnosis was confirmed, within a matter of hours, the city launched a very aggressive campaign of spraying of insecticide in the neighborhoods that seemed most impacted by these identification of these cases, and in a matter of days after that, as soon as we received our first confirmation of a case in another borough, which was not at all close to the other cases, we embarked upon a city-wide campaign, which we believe at this point has been very successful because we're gaining evidence that the mosquito population is down by about 90 percent over levels that we thought may have been before the spraying program had begun.

ELIZABETH FARNSWORTH: Roger Nasci, what have you learned about what to do in these cases or what should have been done earlier so far?

ROGER NASCI: The example of medical detective work that Dr. Cohen was talking about I think is the biggest take-home message that the medical and the public health community needs to bring away from this, is there needs to be a continued effort to maintain the type of capabilities that are required to detect emerging diseases in settings like this and to have the ability to respond to them quickly, like the city's done.

ELIZABETH FARNSWORTH: And Dr. Cohen, what lessons have you learned in New York? Do you think, for example, that there should have been spraying regularly in the summer?

DR. NEAL COHEN: No, I don't think there's any evidence that that would have been appropriate over the course of a number of years now, we haven't had any public health threats as a result of mosquito infestation. In fact, I think what it tells us is that the public health infrastructure needs to be strong and maintained and that our very gifted and dedicated individuals who really worked 24 hours, seven days a week to unmask this problem are at the core of good epidemiology and, frankly, it makes it possible for a local public health agency like our own to respond very, very quickly to a public health threat.

ELIZABETH FARNSWORTH: Dr. Cohen, we heard Susan Dentzer say in the setup that some people are more worried about the spray than anything else, and you already said that you're quite convinced that the sprays are safe. What insecticides are you using, and how do you know they're safe?

DR. NEAL COHEN: Well, malathion, which is an organal phosphate, is the aerial spray and there's an experience of over 40 years with it. And the concentrations that are being used to combat the mosquito population in New York is extremely small. In fact, it's much less than is used in common variety garden and insect spray repellants, so that we feel that we have no -- historically any cases that would suggest that this is a public health threat, and that, while there may be some individuals who are particularly sensitive who might have chronic respiratory illnesses or asthma we have encouraged them to stay indoors during the spraying. But the degradation of these sprays and of these compounds is so rapid, in a matter of a few hours, that it's entirely safe for them to walk the streets and even if they got sprayed while they were in the street, we think that it's a very low probability that they would face any adverse health problem.

ELIZABETH FARNSWORTH: Roger Nasci, anything to add on that?

ROGER NASCI: I agree. The track record of all of the materials that are being used for mosquito control in this situation are approved by the EPA, have labels that precisely define how they're to be applied, and the concentrations and half-life are extremely low. The health risk from the insecticides that are being used to control the mosquitoes is negligible.

ELIZABETH FARNSWORTH: All right. Thank you both very much for being with us.

ROGER NASCI: You're welcome.

DR. NEAL COHEN: You're welcome.

FINALLY - BACK TO SCHOOL

JIM LEHRER: Finally tonight some back to school poetry from NewsHour regular Robert Pinsky, the Poet Laureate of the United States.

ROBERT PINSKY: This is the time of year when college teachers, like me, all over the country enter a new year of work, greeting a new set of students. Here are a couple of poems on that subject -- the first poet emphasizing the sour, fatiguing, downside of academic life -- and the other poet celebrating the adventure. First, in the negative mode, Theodore Retke's little four-line poem entitled "Academic." "The stethoscope tells what everyone fears, you're likely to go on living for years, with a nurse made waddle and a shop girl simper and the style of your prose growinglimper and limper." That unhappy, cynical forecast is in contrast with Barry Spax's poem entitled "Freshman." Spax views the incoming freshmen with undeceived professional eager freshness and the humor of experience. Here's the closing part of his poem. "Full of certainties and reasons or uncertainties and reasons, full of reasons as a conk contains the sea, they wait for the term's first bell, for another mismatched wrestle through the year, for a teacher who's religious in his art, a wizard of a sort to call the roll and for mere names cause people to appear. The best look like the swinging door to the opera just before the Marx Brothers break through. The worst, debased on the back row, as far as one can go from speech, are walls where childish scribblings been erased are stones to teach. And I am paid to ask them questions. Dare man proceed by need alone? Did Esau like his potage? Is any heart in order after bell son? And when one stops to think I'll catch his heel, put scissors to him, excavate his chest, watch freshmen for my words about the past can make you turn your back. I wait to throw most foul, most foul, the future in your face."

RECAP

JIM LEHRER: Again, the major stories of this Wednesday: Hurricane Floyd struck the Atlantic Coast, causing less damage in Florida than expected, and then moved north toward Georgia and the Carolinas. And the U.N. Security Council voted to send a multinational force to restore order in East Timor. Australia will lead the force of at least 7,000 soldiers from Asian and European nations. We'll see you online, and again here tomorrow evening. I'm Jim Lehrer. Thank you and good night.